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Current Developments in the Commercial Divisions of the
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Posted: May 24, 2018

Order Vacating Default Judgment Reversed and Remanded for Traverse Hearing on Service

On May 17, 2018, the First Department issued a decision in Noah Bank v. Hudson Produce, Inc., 2018 NY Slip Op. 03630, reversing an order that vacated a default judgment and remanding for a traverse hearing, explaining:

Since defendant is a corporation, CPLR 311(a)(1) governs the method of service in this action. It is undisputed that both service of the complaint and of plaintiff’s motion papers seeking a default judgment were personally delivered to an employee of defendant, whom the corporate defendant’s principal asserts was not authorized to accept service. Thus an issue of fact is raised as to whether plaintiff validly served defendant pursuant to CPLR 311(a)(1). Accordingly, a traverse hearing should have been held to determine whether defendant was entitled to relief from the judgment pursuant to CPLR 5015(a)(4), before the court ruled on an excusable default and meritorious defense.

If, after the traverse hearing, the court finds that service was improper, then it must grant defendant’s motion to vacate the default judgment pursuant to CPLR 5015(a)(4) and dismiss the action. If, however, the court determines that service was proper under CPLR 311(a)(1), then the motion to vacate the default judgment must be denied pursuant to CPLR 5015(a)(1), as defendant failed to raise a meritorious defense.

(Internal citations omitted).

If you are served with a complaint and fail timely to answer, the court can enter judgment against you: a default judgment. Here, there was a question regarding whether the defendant was properly served, so the First Department ordered a traverse–an evidentiary hearing regarding service of the summons and complaint on the defendant. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding whether you have been properly served or if a default judgment has been entered against you.

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